Fran on the economy

Fran O’Sullivan looks at the recent National-ACT agreement. She covers some of the tensions around spending reviews, but notes that is not the big issue. The big issue is:

Where Act has scored is in getting an agreement out of National to make a concrete goal of closing the income gap with Australia by 2025. This will require a sustained lift in New Zealand’s productivity growth to 3 per cent a year – something that has so far eluded this country.

It is an ambitious target.

To get some focus on this ambition a “high-quality” advisory group will be formed to probe into the real reasons behind New Zealand’s decline in productivity performance, investigate the kind of institutions that Australia sports to drive its superior performance and report annually on progress made towards the 2025 goal.

Frankly, this is the real winner in the National-Act agreement.

The advisory group should move quickly to examine the runs on the board that the Australian Productivity Commission has notched up. The commission undertakes exhaustive investigations into various sectors, interviewing the key players before coming up with in-depth recommendations. It has been a powerful force in driving efficiency into Australia’s economy over the past 15 years.

If such a commission is set up here, it would be great to do it in such a way, the Goff led Labour Party would support it. That doesn’t mean that you agree to implement whatever they come up with, but that you don’t undermine and ridicule them if they ever propose something unpopular.

We saw this with the NZ Institute. They were a darling of Labour, and then they dared to suggest we should be a “fast follower” in terms of climate change responses and the wrath of Helengrad descended on them, and they were marginalised.

Both National and Labour need to realise that if they set up a NZ Productivity Commission, it will sometimes recommend stuff they don’t like. And the challenge for them will be to disagree with the message, but not shoot the messenger.